The upcoming Employment Situation Report for June could show the economy has stalled, at least in terms of the addition of new jobs. The May report showed an addition of only 36,000 jobs. June could show a number of zero.
Experts argue that the May report may have been affected by a strike by Verizon workers, or a slowdown in the energy sector set off by the low price of crude. However, the Bureau of Economic Analysis showed, based on its third estimate of first-quarter gross domestic product (GDP), that the expansion was only 1.1%. Anxious economists worry that the figure will be no better for the second quarter — and might be worse.
The Federal Reserve has just signaled a sharp concern about the U.S. economy, even beyond the Brexit fallout, which may not materialize for many months, if at all. From the Federal Reserve’s Federal Open Market Committee:
The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run.
Several large sectors of the economy have shown particular weakness. Among these are retail and oil and mining. Retail in particular has been plagued by store overcapacity and the damage from Amazon.com. The harm has accelerated recently. Oil employment may rise as the price of crude increases, but new hires likely lag behind this improvement, and evidence suggests it is long term.
A recent survey of America’s largest companies done for the CEO Roundtable showed that these leaders have very modest expectations for the economy. In its survey from the second quarter:
“Increased plans for near-term sales, investment and hiring indicates modest economic improvement,” said Doug Oberhelman, Chairman & CEO of Caterpillar Inc., and Chairman of Business Roundtable. “But the CEO estimate for barely more than 2 percent GDP growth this year points to an economy that continues to perform below its potential. Unfortunately, it’s more of the same ‘one step forward, one step back’ we’ve been experiencing for a number of years now. We need sustained, healthy growth, which would be aided by enactment of pro-growth policies, such as ratifying the Trans-Pacific Partnership and updating our outdated tax system. Absent that, the U.S. economy will continue to be stuck in the slow lane.”
According to the organization:
Business Roundtable CEO members lead U.S. companies with $7 trillion in annual revenues and nearly 16 million employees.
The figures do not include any look at small businesses. However, companies with modest employee counts do not have nearly as much access to capital as large ones.
Signs point to a weak June jobs report, and maybe even one that shows no addition of jobs at all.